Interest rate swap compression

Abstract

A computer system may access data corresponding to a portfolio that comprises interest rate swaps and may calculate parameters for a compressed swap. The computer system may determine, based at least in part on the parameters for the compressed swap, a performance bond requirement attributable to the interest rate swaps. The computer system may compare the performance bond requirement to account data associated with a holder of the portfolio and may perform one or more additional actions based on the comparing.

We claim: 
     
         1 . A method comprising:
 performing, automatically by a computer system when the data size of data corresponding to a portfolio comprising a plurality of interest rate swaps, each being characterized by a risk value, exceeds a defined data storage capacity of a non-transitory memory device in which the data is stored:
 calculating, by the computer system, one or more replacement swaps having a combined risk value equivalent to a sum of the risk values of each of at least a subset of the plurality of interest rate swaps of the portfolio; 
 forming, by the computer system, replacement data corresponding to a replacement portfolio comprising the one or more replacement swaps in place of the subset of the plurality of interest rate swaps of the portfolio; and 
 replacing, by the computer system, the data comprising the portfolio with the replacement data in the non-transitory memory device to reduce a data storage requirement of the portfolio therein. 
   
     
     
         2 . The method of  claim 1 , wherein the one or more replacement swaps comprise at least two replacement swaps when the computer system determines that a data value precision of the sum of the risk values of each of at least a subset of the plurality of interest rate swaps of the portfolio exceeds a data value precision of at least one component of the computer system which prevents the computer system from calculating less than the at least two replacement swaps having a combined risk value equivalent to the sum of the risk values of each of at least a subset of the plurality of interest rate swaps of the portfolio. 
     
     
         3 . The method of  claim 1 , further comprising:
 determining, by the computer system, a performance bond requirement attributable to the plurality of interest rate swaps;   comparing, by the computer system, the performance bond requirement to account data associated with a holder of the portfolio;   performing, by the computer system, one or more additional actions based on the comparing comprising at least one of (i) storing data regarding satisfaction of the performance bond requirement, and (ii) transmitting a communication regarding the performance bond requirement.   
     
     
         4 . The method of  claim 1 , wherein
 calculating, for each of the one or more replacement swaps, a replacement swap fixed rate value x B , a replacement swap notional value N B , and a replacement swap floating rate spread value c according to             x   B     =     1   m         ∑     j   =   1     m         x   j         ,                     N   B     =           ∑     j   =   1     m         N   j       x   j               x   B         ,    and                       c   =     1         ∑     g   =   1     G       d     f   g     d     t   g                                 ∑     j   =   1     m         x   j             ∑     j   =   1     m         N   j             ∑     g   =   1     G         f   g     d     f   g     d     t   g             m       ∑     j   =   1     m         N   j       x   j             −       ∑     g   =   1     G         f   g     d     f   g     d     t   g             ,    and               x j  is a fixed rate value for the j th  interest rate swap, wherein m is the number of interest rate swaps in the plurality of interest rate swaps, N j  is a notional value of the j th  interest rate swap, G is the number of floating rate payment periods in the common tenor, f g  is a floating rate value corresponding to the g th  floating rate payment period, df g  is a floating rate discount factor corresponding to the g th  floating rate payment period, and dt g  is a duration of the g th  floating rate payment period.   
     
     
         5 . The method of  claim 1 , wherein
 a DV01 value for the one or more replacement swaps is the same as a sum of DV01 values for the plurality of interest rate swaps, and   a CV01 value for the one or more replacement swaps is the same as a sum of CV01 values for the plurality of interest rate swaps.   
     
     
         6 . The method of  claim 1 , further comprising:
 determining a performance bond requirement of the plurality of interest rate swaps based on first and second disaggregated swaps,   the first disaggregated swap comprises a replacement swap fixed rate value x B , a first disaggregated swap notional value N B1 , and a first disaggregated swap spread value c 1 , and   the second disaggregated swap comprises the replacement swap fixed rate value x B , a second disaggregated swap notional value N B2 , and a second disaggregated swap spread value c 2 , and further comprising:
 determining a required precision for the floating rate spread value c; 
 determining the required precision is greater than an available precision; 
 based on the determining that the required precision is greater than an available precision, selecting a c 1  value greater than the c value and a c 2  value less than the c value; and 
 determining N B1  and N B2  values such N B1 *c 1  + N B2 *c 2  = N B *c and such that N B1  + N B2  = N B . 
   
     
     
         7 . The method of  claim 6 , wherein:
 determining the required precision comprises determining the required precision according to               D   =               log         1                 E   +       ∑     g   =   1     G         f   g     d     f   g     d     t   g                 ∑     j   =   1     m         N   j         −       m       ∑     j   =   1     m         N   j       x   j                 ∑     j   =   1     m         x   j                             ∑     g   =   1     G       d     f   g     d     t   g             m       ∑     j   =   1     m         N   j       x   j                 ∑     j   =   1     m         x   j                     −   c               ,   and               D is the required precision, E is a constant chosen to limit a difference between a present value of the one or more replacement swaps and combined present values of the plurality of interest rate swaps, m is the number of interest rate swaps in the plurality of interest rate swaps, x j  is a fixed rate value for the j th  interest rate swap, N j  is a notional value of the j th  interest rate swap, G is the number of floating rate payment periods in the common tenor, f g  is a floating rate value corresponding to the g th  floating rate payment period, df g  is a floating rate discount factor corresponding to the g th  floating rate payment period, and dt g  is a duration of the g th  floating rate payment period.   
     
     
         8 . A non-transitory computer-readable media storing computer executable instructions that, when executed, cause a computer system to perform operations that include:
 performing, automatically by a computer system when the data size of data corresponding to a portfolio comprising a plurality of interest rate swaps, each being characterized by a risk value, exceeds a defined data storage capacity of a non-transitory memory device in which the data is stored:
 calculating, by the computer system, one or more replacement swaps having a combined risk value equivalent to a sum of the risk values of each of at least a subset of the plurality of interest rate swaps of the portfolio; 
 forming, by the computer system, replacement data corresponding to a replacement portfolio comprising the one or more replacement swaps in place of the subset of the plurality of interest rate swaps of the portfolio; and 
 replacing, by the computer system, the data comprising the portfolio with the replacement data in the non-transitory memory device to reduce a data storage requirement of the portfolio therein. 
   
     
     
         9 . The one or more non-transitory computer-readable media of  claim 8 , wherein the one or more replacement swaps comprise at least two replacement swaps when the computer system determines that a data value precision of the sum of the risk values of each of at least a subset of the plurality of interest rate swaps of the portfolio exceeds a data value precision of at least one component of the computer system which prevents the computer system from calculating less than the at least two replacement swaps having a combined risk value equivalent to the sum of the risk values of each of at least a subset of the plurality of interest rate swaps of the portfolio. 
     
     
         10 . The one or more non-transitory computer-readable media of  claim 8 , wherein the computer executable instructions are further executable to cause the computer system to perform operations that include:
 determining, based at least in part on the combined risk value of the one or more replacement swaps, a performance bond requirement attributable to the plurality of interest rate swaps;   comparing the performance bond requirement to account data associated with a holder of the portfolio;   performing one or more additional actions based on the comparing comprising at least one of (i) storing data regarding satisfaction of the performance bond requirement, and (ii) transmitting a communication regarding the performance bond requirement.   
     
     
         11 . The one or more non-transitory computer-readable media of  claim 8 , wherein the computer executable instructions are further executable to cause the computer system to perform operations that include:
 calculating, for each of the one or more replacement swaps, a replacement swap fixed rate value x B , a replacement swap notional value N B , and a replacement swap floating rate spread value c according to             x   B     =     1   m         ∑     j   =   1     m         x   j         ,                     N   B     =           ∑     j   =   1     m         N   j       x   j               x   B         ,    and                       c   =     1         ∑     g   =   1     G       d     f   g     d     t   g                         ∑     j   =   1     m         x   j             ∑     j   =   1     m         N   j             ∑     g   =   1     G         f   g     d     f   g     d     t   g             m       ∑     j   =   1     m         N   j       x   j             −                       ∑     g   =   1     G         f   g     d     f   g     d     t   g             ,    and               x j  is a fixed rate value for the j th  interest rate swap, wherein m is the number of interest rate swaps in the plurality of interest rate swaps, N j  is a notional value of the j th  interest rate swap, G is the number of floating rate payment periods in the common tenor, f g  is a floating rate value corresponding to the g th  floating rate payment period, df g  is a floating rate discount factor corresponding to the g th  floating rate payment period, and dt g  is a duration of the g th  floating rate payment period.   
     
     
         12 . The one or more non-transitory computer-readable media of  claim 8 , wherein
 a DV01 value for the one or more replacement swaps is the same as a sum of DV01 values for the plurality interest rate swaps, and   a CV01 value for the one or more replacement swaps is the same as a sum of CV01 values for the plurality of interest rate swaps.   
     
     
         13 . The one or more non-transitory computer-readable media of  claim 8 , wherein the computer executable instructions are further executable to cause the computer system to perform operations that include:
 determining a performance bond requirement of the plurality of interest rate swaps based on first and second disaggregated swaps,   the first disaggregated swap comprises a replacement swap fixed rate value x B , a first disaggregated swap notional value N B1 , and a first disaggregated swap spread value c 1 , and   the second disaggregated swap comprises the replacement swap fixed rate value x B , a second disaggregated swap notional value N B2 , and a second disaggregated swap spread value c 2 , and further comprising stored computer executable instructions that, when executed, cause the computer system to perform operations that include:
 determining a required precision for the floating rate spread value c; 
 determining the required precision is greater than an available precision; 
 based on the determining that the required precision is greater than an available precision, selecting a c 1  value greater than the c value and a c 2  value less than the c value; and 
 determining N B1  and N B2  values such N B1 *c 1  + N B2 * C2  = N B *c and such that N B1  + N B2  = N B . 
   
     
     
         14 . The one or more non-transitory computer-readable media of  claim 13 , wherein:
 determining the required precision comprises determining the required precision according to               D   =               log         1                 E   +       ∑     g   =   1     G         f   g     d     f   g     d     t   g                 ∑     j   =   1     m         N   j         −       m       ∑     j   =   1     m         N   j       x   j                 ∑     j   =   1     m         x   j                             ∑     g   =   1     G       d     f   g     d     t   g             m       ∑     j   =   1     m         N   j       x   j                 ∑     j   =   1     m         x   j                     −   c               ,    and               D is the required precision, E is a constant chosen to limit a difference between a present value of the one or more replacement swaps and combined present values of the plurality of interest rate swaps, m is the number of interest rate swaps in the plurality of interest rate swaps, x j  is a fixed rate value for the j th  interest rate swap, N j  is a notional value of the j th  interest rate swap, G is the number of floating rate payment periods in the common tenor, f g  is a floating rate value corresponding to the g th  floating rate payment period, df g  is a floating rate discount factor corresponding to the g th  floating rate payment period, and dt g  is a duration of the g th  floating rate payment period.   
     
     
         15 . A computer system comprising:
 a memory device having a defined storage capacity;   at least one processor coupled with the memory device; and   at least one non-transitory memory coupled with the processor, wherein the at least one non-transitory memory stores instructions that, when executed, cause the processor to:
 perform, automatically when the data size of data corresponding to a portfolio comprising a plurality of interest rate swaps, each being characterized by a risk value, exceeds a defined data storage capacity of a non-transitory memory device in which the data is stored:
 calculate one or more replacement swaps having a combined risk value equivalent to a sum of the risk values of each of at least a subset of the plurality of interest rate swaps of the portfolio; 
 form replacement data corresponding to a replacement portfolio comprising the one or more replacement swaps in place of the subset of the plurality of interest rate swaps of the portfolio; and 
 replace the data comprising the portfolio with the replacement data in the non-transitory memory device to reduce a data storage requirement of the portfolio therein. 
 
   
     
     
         16 . The computer system of  claim 15 , wherein the one or more replacement swaps comprise at least two replacement swaps when the computer system determines that a data value precision of the sum of the risk values of each of at least a subset of the plurality of interest rate swaps of the portfolio exceeds a data value precision of at least one component of the computer system which prevents the computer system from calculating less than the at least two replacement swaps having a combined risk value equivalent to the sum of the risk values of each of at least a subset of the plurality of interest rate swaps of the portfolio. 
     
     
         17 . The computer system of  claim 15 , wherein the instructions are further executable to cause the processor to :
 determine, based at least in part on the combined risk value of the one or more replacement swaps, a performance bond requirement attributable to the plurality of interest rate swaps;   compare the performance bond requirement to account data associated with a holder of the portfolio;   performing one or more additional actions based on the comparing comprising at least one of (i) storing data regarding satisfaction of the performance bond requirement, and (ii) transmitting a communication regarding the performance bond requirement.   
     
     
         18 . The computer system of  claim 15 , wherein the instructions are further executable to cause the processor to perform operations that include:
 calculating, for each of the one or more replacement swaps, a replacement swap fixed rate value x B , a replacement swap notional value N B , and a replacement swap floating rate spread value c according to             x   B     =     1   m         ∑     j   =   1     m         x   j         ,                     N   B     =           ∑     j   =   1     m         N   j       x   j               x   B         ,    and                       c   =     1         ∑     g   =   1     G       d     f   g     d     t   g                         ∑     j   =   1     m         x   j             ∑     j   =   1     m         N   j             ∑     g   =   1     G         f   g     d     f   g     d     t   g             m       ∑     j   =   1     m         N   j       x   j             −                       ∑     g   =   1     G         f   g     d     f   g     d     t   g             ,    and               x j  is a fixed rate value for the j th  interest rate swap, wherein N j  is a notional value of the j th  interest rate swap, wherein m is the number of interest rate swaps in the plurality of interest rate swaps, G is the number of floating rate payment periods in the common tenor, f g  is a floating rate value corresponding to the g th  floating rate payment period, df g  is a floating rate discount factor corresponding to the g th  floating rate payment period, and dt g  is a duration of the g th  floating rate payment period.   
     
     
         19 . The computer system of  claim 15 , wherein
 a DV01 value for the one or more replacement swaps is the same as a sum of DV01 values for the plurality of interest rate swaps, and   a CV01 value for the one or more replacement swaps is the same as a sum of CV01 values for the plurality of interest rate swaps.   
     
     
         20 . The computer system of  claim 15 , wherein the instructions are further executable to cause the processor to perform operations that include:
 determining a performance bond requirement attributable to the plurality of interest rate swaps based on first and second disaggregated swaps,   the first disaggregated swap comprises a replacement swap fixed rate value x B , a first disaggregated swap notional value N B1 , and a first disaggregated swap spread value c 1 , and   the second disaggregated swap comprises the replacement swap fixed rate value x B , a second disaggregated swap notional value N B2 , and a second disaggregated swap spread value c 2 , and wherein the at least one non-transitory memory stores instructions that, when executed, cause the computer system to perform operations that include
 determining a required precision for the floating rate spread value c, 
 determining the required precision is greater than an available precision, 
 based on the determining that the required precision is greater than an available precision, selecting a c 1  value greater than the c value and a c 2  value less than the c value, and 
 determining N B1  and N B2  values such N B1 *c 1  + N B2 *c 2  = N B *c and such that N B1  + N B2  = N B . 
   
     
     
         21 . The computer system of  claim 20 , wherein the instructions are further executable to cause the processor to perform operations that include:
 determining the required precision comprises determining the required precision according to               D   =               log         1                 E   +       ∑     g   =   1     G         f   g     d     f   g     d     t   g                 ∑     j   =   1     m         N   j         −       m       ∑     j   =   1     m         N   j       x   j                 ∑     j   =   1     m         x   j                             ∑     g   =   1     G       d     f   g     d     t   g             m       ∑     j   =   1     m         N   j       x   j                 ∑     j   =   1     m         x   j                     −   c               ,    and               D is the required precision, E is a constant chosen to limit a difference between a present value of the one or more replacement swaps and combined present values of the plurality of interest rate swaps, m is the number of interest rate swaps in the plurality of interest rate swaps, x j  is a fixed rate value for the j th  interest rate swap, N j  is a notional value of the j th  interest rate swap, G is the number of floating rate payment periods in the common tenor, f g  is a floating rate value corresponding to the g th  floating rate payment period, df g  is a floating rate discount factor corresponding to the g th  floating rate payment period, and dt g  is a duration of the g th  floating rate payment period.